Impact of Financial Crisis on Indian Capital Market

Abstract

In this paper, we document The Impact of Financial Crisis on Indian Capital Market. Financial crisis is a situation in which the supply of money is outpaced by the demand for money. This means that liquidity is quickly evaporated because available money is withdrawn from banks (called a run), forcing banks either to sell other investments to make up for the shortfall or to collapse. The impact of the crisis is more vividly observable in the emerging markets which are suffering from one of their biggest selloffs. Economies with disproportionate offshore borrowings (like that of Australia) are adversely affected by the western financial crunch. Globalization has ensured that none of the economies of the world stay insulated from the financial crisis in the developed economies. The pace of economic development in any country is determined among other things by the rate of capital formation and long term investment. The capital formation is determined by the mobilization, augmentation and channelization of investible funds. The rate of long term investment is determined by the availability of funds and the opportunity available for investment.In the subsequent parts of the paper, several issues will be discussed which will provide a detailed account of the origin of the crisis and the ripple effect of economic downturn of the world‘s largest economy which engulfed even the fast growing emerging economies into the crisis. The impact of the crisis on the Indian economy will also be dealt with. Overall, the paper provides a wealth of new information about impact of financial crisis on Indian capital market and how the industries hit by the financial crisis in India and how it shows its impact on capital market in directly and indirectly.